Taxation trends in Western Balkans, 2016

FIRST EDITION, 2016
A PUBLICATION THAT
DESCRIBES THE TAXES AND
THEIR FUNCTIONALITY IN
ALBANIA, BOSNIA -
HERZEGOVINA, KOSOVO,
MACEDONIA, MONTENEGRO
AND SERBIA
TAXATION
TRENDS
IN
WESTERN
BALKANS,
2016
ALTAX Center
2016/11/08

TAXATION TRENDS IN WESTERN BALKANS, 2016 1
©
ALTAX
Fiscal Studies
November 2016
Preparation and distribution
A. GJOKUTAJ, Chairwomen
ALTAX Center
TAXATION TRENDS IN WESTERN BALKANS, 2016
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policy. The primary goal is to promote education in taxation, help and assist the taxpayers and interested parties
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academics and fiscal experts helps to expand and create a comprehensive audience in help of increasing of fiscal
capacities in Albania and Kosovo.
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November 2016
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ALTAX
ALBANIAN FISCAL STUDIES

ALTAX Center
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Data 02.11.2016
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TAXATION TRENDS IN
WESTERN BALKANS, 2016
This document is prepared by the ALTAX, in a series of thematic collections named ALBANIAN FISCAL STUDIES, with the aim to
present an insight view of taxation policies and issues in order to become as a part of discussion for all people concerned, or for use
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©2016
ALTAX CENTER
NOVEMBER 2016
TAXATION TRENDS IN WESTERN BALKANS, 2016
A COMPARATIVE VIEW OF TAXATION AND RULES FOR BUSINESSES AND INDIVIDUALS
IN 6 WESTERN BALKAN COUNTRIES
ABSTRACT
This work is a product of the staff of ALTAX experts. The findings, and conclusions expressed in
this work reflect the copy of legislation and comments done by different authors and by the own
experts too. The work is a compilation of recent developments of tax rates and tax policies.
The publication aims to present and compare the tax systems for six neighbor countries in West
Balkans according to the tax policies and tax rates in 2016. The work includes the common and
different elements of 6 tax systems and also new developments, investment incentives and
rules about doing business in Western Balkans.
Keywords: tax system, corporate, business, individual, social contributions, VAT, CIT, PIT

Contents
Preface 5
1. Tax system and incentives for foreign investments in Albania 7
2. The federal system of taxes in Bosnia and Herzegovina 22
3. The simple tax system of Kosovo 33
4. Tax system competitiveness in Macedonia 43
5. Montenegro tax system trends 57
6. Serbia tax system highlights 64
Conclusion 70

Preface
The Taxation trend in Western Balkans, 2016 publication is the first edition from ALTAX CENTER,
in the thematic collection and publications of tax policies and issues in the Western Balkans
countries. The countries that compile the contents of this report are part of Western Balkans
and are ranked based in alphabetic order. They are Albania, Bosnia and Herzegovina, Kosovo,
Macedoni, Montenegro and Serbia.
The publication of policies and tax rates, together with the tax incentives for investors show
both successful policies and reform challenges, as well as provide a good point of reference for
individuals, scholars and businesses to participate in discussion around tax debates across a
broader range of issues.
This presentation shows that taxes on capital are not enough to give to the economy the proper
incentives if the indirect taxes are not harmonized with the direct taxes. The tax policy on the
other hand is only part of the picture when looking at the contribution made to investments and
economy.
Since taxes are a crucial component of a country’s international competitiveness there’s
important to factorize the tax incentives to make the economic environment more competitive.
In today’s globalized economy, the structure of a country’s tax code is an important factor for
businesses when they decide where to invest, how much to invest, and which types of
operations to locate in which countries.
The main characteristic of tax systems in Western Balkans is the low tax rates on taxes on
capitals and on labor with the objective to give to the business investment and activities the
proper guarantee for their economic performance. In recent years, all the Balkan countries have
recognized this fact and have moved to reform their tax legislation to be more competitive.

The level of taxation in every country determines how much of the money residents earn can
get to take home and how much of the wealth they accrue could get to keep. It affects the
neighborhood in which we can afford to live, the luxuries we can afford to buy and our chances
of getting on the property ladder.
The report, which has been presented this year, factors in the time taken to pay taxes, the
overall tax rate are all included in this publication.

1. Tax system and incentives for foreign investments in Albania
The principal business entities in Albania are as follows: (i) general partnership; (ii) limited
partnership; (iii) limited liability company (locally sh.p.k.); (iv) joint stock company (locally sh.a.);
v) a branch; and vi) a representative office. Any investment made through merger and
acquisition, takeover and green field investment is addressed in the Law on Entrepreneurs and
Commercial Companies, 20081
.
Branches
Foreign legal entities may register branches in the Republic of Albania. Branches are entered in
the Commercial Register at the National Business Center (NBC). Though part of a foreign
company, branches are considered independent and therefore must keep separate accounting
books and prepare balance sheets. However, registered capital is not required for the
establishment of a branch.
Representative offices
Under the 2008 Commercial Companies Law, a foreign investor can have a representative office
in Albania. The representative office must also be registered with NBC and have a legal
representative empowered by the company to manage the representative office. However, such
an office is not entitled to perform commercial activity.
The Commercial Register, a unique electronic database of business entities existing under the
Albanian law, is regulated by the legislative provisions for the NBC. The following are subject to
registration with the Commercial Register:
- Individuals who carry out commercial activity
- Simple partnerships under the Civil Code
- Commercial companies
- Branches and representative offices
- Saving-credit companies and unions
- Cooperation companies and any other entity subject to registration according to Albanian
1
See www.qkb.gov.al

legislation.
The NBC has the authority to receive all registration applications and keep all documents
containing information related to the incorporation, activity, statutory changes, organization of
businesses and legal representatives. The NRC provides full electronic access to the Commercial
Register, information for the general public, foreign investors and governmental institutions via
the internet. It offers a “one-stop-shop” solution for business registration as the registration
with the Commercial Register is simultaneous with the registration with the tax authorities, the
social and health insurance system and the Employment Inspectorate. The NBC serves as a
single “window” for all types of business entities throughout Albania to perform and apply for all
business registration-related processes.
Each individual, who is a partner in a commercial company, is responsible for the company's tax
liabilities to the tax administration, according to provisions in the company charter. According to
commercial registry, over 98 percent of companies are limited liability companies. The
remainder is joint stock companies, partnerships and less than 0.5 percent is limited
partnerships. The tax period commences on 1 January and ends on 31 December of each
calendar year.
At the moment a company is registered and starts its economic activity, it is responsible for:
- Calculation of VAT and timely declaration and payment;
- Payment of advance tax installments for profit tax to pay every three months;
- Calculation, timely declaration and payment of tax on incomes from employment
for employers and employees;
- Calculation, timely declaration and payment of social and health contributions;
- Withholding and payment of withheld tax, under obligation of Law "On Income tax";
- Calculation, timely declaration and payment of taxes according to specific activity
"for gambling, casinos and hippodromes" for the companies that have to deal
with this tax;
- Calculation, timely declaration and payment of excise under specific law "On Excises" for
the companies that have to deal with this tax;
- Calculation, timely declaration and payment of national taxes and local taxes (if).

In order to calculate taxes, taxpayers who are subject to VAT or profit tax keep registers,
accounting records, books and financial information and issue tax receipt or tax coupon, in
accordance with relevant laws and regulations pursuant to them. Taxpayers keep their accounts
in accordance with provisions of the law "On accounting and financial statements" and act
pursuant to that law in accordance with IFRS principles. In order to register economic
transactions related to taxes, taxpayers can also use books, records or documents specified in
specific tax laws and respective regulation provisions. Taxpayers are required to use basic
documentation, including tax invoice, in accordance with tax legislation and relevant legal
provisions.
Taxes in Albania are grouped into three main categories: (a) indirect taxes (VAT, excise,
gambling and other indirect taxes), direct taxes (income tax, personal income taxes, taxes on
capital); (b) local taxes, and (c) social and health security contributions.
National Taxes, administered by the Central Tax Administration and Customs Administration
include:
1. Indirect taxes2
a. Value added tax;
b. Excise (since 2012 is administered by Custom administration);
c. Taxes on gambling, casinos and hippodromes;
2. Direct taxes
d. Income tax;
e. National taxes;
f. Other taxes, which are defined as such by special law, and
g. Customs taxes.
3. Social and health security contributions, as defined in the social insurances law
4. Local taxes and tariffs administered by Local Tax Administration include:
a. Tax on immovable property, which includes tax on buildings and agricultural land;
b. Tax on hotel accommodation;
2
See explanation of term in ANNEX

c. Tax on impact of new constructions upon infrastructure;
d. Tax on transfer of ownership right on real estate;
e. Annual tax for vehicle registration;
f. Tax for occupation of public space;
g. Advertising tax;
h. Temporary taxes
i. Registration tariff for various activities;
j. Fee on infrastructure of education;
k. Vehicle parking tariff;
l. Tariff for services
Value Added Tax
The majority of goods and services are subject to VAT at a standard rate of 20 per cent, although
certain exemptions apply (such as for financial services, postal services, supplies of electronic
and written media for advertising, supplies of services at casinos and hippodromes (race tracks),
sales of newspapers, magazines and advertisement services in them, as well as research
hydrocarbon operations).
In 2014 it was approved by Albanian Parliament a new VAT Law, which applied since January
2015. All taxable persons carrying out independent economic activities are required to apply for
a mandatory VAT registration if their taxable turnover exceeds ALL 5 million3
in a calendar year.
Any taxable person that performs import-export activities and any tax registered freelancer
should register for VAT purposes regardless of the annual turnover.
The new law provides convenient and attractive environment, safety for local entrepreneurship
foreign legal consistency fiscal, well-defined rules to ensure:
- Uniformity in the application of VAT, and so unified taxation system in line with that of the EU
countries;
- Fair competition and equal conditions, eliminating factors that affect these conditions;
- Promoting the circulation of goods services, making our business competitive with other
countries.
3
EUR 36,000

According to the VAT Law (No. 92/2014), the most significant incentives for investors in Albania
are as follows:
- VAT credit at the rate of 100 per cent for importers of machinery and equipment which
will serve entirely their taxable economic activity;
- exemption of VAT for export of international services;
- automatic VAT refund system from treasury, based on risk management
The tax export regime can be considered a kind of investment incentive for both foreign and
national entrepreneurs, and is applicable to all Albanian products destined for export outside
the Albanian customs territory. The export VAT rate it is 0 per cent. Exporters can benefit from a
VAT credit for purchases made on behalf of their exports.
Overall, if the tax credit for a taxation period is higher than the VAT applicable in that period,
taxpayers have the right to use the credit surplus for the following taxable period. Taxable
persons have the right to request a reimbursement of the credit surplus when they have a
taxable credit amount over three months that is above 400,000 Albanian Leks. As stated above,
and since they are essentially exporters, investors are entitled to VAT reimbursement on the
purchase of domestic goods or raw materials when it is for production purposes4
.
Corporate taxation
A company is considered resident in Albania if it has its legal seat or place of effective
management in Albania. Further, partnerships and legal entities with a permanent
establishment in Albania would be considered resident taxpayers. Residents must register with
the National Registration Center (NRC). Residents are taxed on their worldwide income;
nonresidents are taxed only on their Albanian- source income.
Taxable income of residents includes business profits, as well as dividends, interest, and realized
capital gains. Taxable profit is the difference between gross profit and related expenses. The
determination of the taxable profit is generally based on the profits shown on the financial
statements.
From the January 1st, 2014 the income tax rate of 15%.
4
For detailed explanation email to altax@consultant.com

Dividend income is considered taxable income, unless the participation exemption or a
double tax treaty relief is applicable.
Dividends and distribution of earnings are excluded from a resident’s taxable profit when
dividends and earnings are distributed from resident companies or partnerships which are
subject to corporate income tax despite the participation quota, in value or number, of the
share capital, of the right to vote or the participation in initial capital or share capital of the
beneficiaries.
No participation exemption is in place for holding of foreign companies. Consequently,
dividends received from foreign companies would be included in taxable income. Taxation of
dividends paid to nonresidents – Dividend income distribution to a nonresident is subject to a
withholding tax of 15%5
, unless a double tax treaty provides for a lower rate.
Realized capital gains are considered as taxable income and are taxed together with other
income, at 15% on a net basis.
A loss may be covered by profits in the next three fiscal years, according to the principle ''first
loss before the last one”. The tax loss cannot be carried forward if the ownership of stock capital
or voting rights of an entity changes by more than 50% in value or number.
Double taxation is avoided through tax treaties. Albania currently has signed 40 tax double
treaties in effect with other countries. The treaties are based under principles of OECD Model
Tax Convention on Income and Capital. In 2013, Albania ratified the Convention on Mutual
Administrative Assistance in Tax Matters, a multilateral agreement developed jointly by the
Council of Europe and the OECD.
When a Tax Double Treaty is in force between Albania and another state, its provisions prevail
over the local tax regulations. The effects of tax double treaties are in force with countries
below, since the year in addition.
5
Since January 2015, amended by Law 156/2014

Tax Incentives or tax expenditures
Every exemptions or tax incentive is granted only by law. The tax incentives comprise different
forms applied by law:
- low tax rates (15%) with no preconditions,
- special scheme for farmers,
- tax exemptions sectors (research of hydrocarbons),
- contributions made by the employer to ensure the health and lives of employees are
nontaxable,
- investment tax credits (investments of all kinds),
- tax loss carry forward,
- accelerated depreciation rates.
If the tax rate on income taxes can be compared with the neighbor countries with Albania, it can
be noticed that the income tax rates are competitive and attractive ones. The tax rate on
income and profit is applied on equal basis to all taxpayers regardless of the region, the branch
they perform their economic activity from or the type of activity.
Tax is granted for selected projects on a case-by-case basis and for every business as per under
- articles 18 of income tax law;
- articles 53, 54 and 56 of VAT law including the special scheme of exemption from VAT
for investments value over € 360,000;
- articles 10-12 of excise tax law; and
- article 9 of National Taxes law.
The investment projects may include investments channeled to public services, infrastructure
projects, as well as tourism and oil industries.
Foreign investors can freely transfer, and purchase to transfer, foreign currency abroad after
any corporate taxes due, including withholding taxes, have been duly paid.
The owners of companies may transfer abroad:
- Income generated through an investment
- Compensation against expropriation of investments for state needs

- Liquidation quotas upon termination of the investment
- Proceeds from the sale of an investment
- Sums received as a result of enforcement proceedings.
This right may also be exercised by foreign individuals who have obtained a permanent
residence permit and are registered as sole traders or participate in a co-operative, in an
unlimited partnership or as unlimited partners in a limited partnership, after the payment of all
taxes due.
Tax exemption
Albania’s tax regime is considered by far one of the most important incentives for foreign
investment; however, the tax system as such does not discriminate against or in favor of foreign
investors. Likewise, legislation relating to the public procurement process makes little distinction
between foreign and domestic companies, as many activities in Albania require licensing within
the territory. The procedures for obtaining a license are, however, the same for national and
foreign companies. The government to date has not screened foreign investments and provided
little in the way of tax, financial or other special incentives.
Withholding tax
Withholding tax is applicable to dividend, interest, and royalty payments, as well as certain
other types of Albanian-source income earned by nonresidents.
Dividends are subject to a 15% withholding tax rate, unless the rate is reduced under an
applicable tax treaty. Interest is taxed at a 15% withholding tax rate, unless the rate is reduced
under an applicable tax double treaty. Royalties are subject to a 15% withholding tax rate,
unless the rate is reduced under an applicable tax double treaty.
Withholding tax must be paid no later than the 20th day of the month following the month the
remittance upon which the withholding tax is assessed. The payer of such amounts is
responsible for retaining and paying the tax on the account of the tax authorities.

A withholding tax of 15% is applicable to the gross amount of:
a) technical service fees;
b) management fees;
c) payments for construction, installation, assembly or related supervisory work;
d) rental payments; and
e) payment for the performance of entertainment activities, which are made to
nonresident taxpayers.
The income in the form of cash for increasing the capital with resources from outside the
organization are not taxed ago, and have been subject to tax and that are not accompanied by
official documents proving the origin of this income are taxable by 15% as personal income.
Payroll tax
Resident employers are required to withhold personal income tax on employee wages and remit
to tax authorities on a monthly basis. The threshold of salary non taxable it is 30.000 Leks per
month (€ 215 per month). In Albania, since 2014 is applied the progressive tax rate, based in
three tax brackets, as can be seen in ANNEX.
Social Security and Health filing requirements
Employers must properly calculated social and health insurance contributions and must pay no
later than the 20th date of the month following the month of calculation. The total social
security contribution is 27.9 per cent of the monthly secured compensation salary. Social
security and health insurance contributions are paid by the employer at the rate of 16.7%. Social
security contributions paid by the employee are rated at 11.2%.
Albania doesn't have a sovereign wealth fund.
Local taxes
According to the Law on the Local Tax System, a wide range of local taxes is levied on every
business activity. Most of them are levied at specific amounts and differ by location of business
activity in the territory of Albania.
Transfer Tax of immovable property
The transfer tax which is imposed on the seller on a net basis from for the transfer of the

immovable property varies from one municipality to another. The minimum tax for residential
building it is 100 Leks/ m² per year and a maximum of 1.000 lek/ m². The minimum tax for
commercial building it is 300 Leks/ m² per year and a maximum of 2.000 lek/ m². However, this
tax may be credited on capital gains for income tax purposes.
No transfer tax is imposed on the transfer of securities.
Tax on small business
Individual entrepreneurs or legal entities that conduct business activity in Albania and have an
annual turnover of less than ALL 8 million are subject to the local tax on small business. Since
2016, small businesses having an annual turnover of less than ALL 2 million are not anymore
subject to fixed tax obligation amounting to ALL 25,000 (approximately EUR 180) per year which
it was until 2015.
Also, the taxpayers with an annual turnover between ALL 2 million and ALL 5 million will not be
subject to the simplified income tax on small business at a 7.5 percent rate. This tax since 2016
will be 0%.
The taxpayers with an annual turnover between ALL 5 million and ALL 8 million will be subject to
a decreased rate of the simplified income tax on small business. Since 2016 the tax rate will be
5% instead of the 7.5 percent rate, which was until 2015.
The simplified income tax on small business for this segment will be paid in advance on a
quarterly basis, by 20 April, 20 July, 20 October and 20 December.
Property tax
The property tax includes (a) Property tax on real estate, (b) property tax on agriculture land, (c)
property tax on building ground.
Property tax on real estate
The property tax on real estate it is between 5 to 400 Leks per m², annually and is based on the
decision of Council of Municipalities according to the categories of municipalities.
The tax on residential buildings used for business purposes varies from ALL 5 to ALL 30 per m²,
while the tax on buildings owned by businesses varies from ALL 200 to ALL 400 per m². The

variation depends by on to other category of the municipality.
The tax on buildings are double for any second or subsequent real estate property (apartment
or house) owned by individuals.
The local tax on agricultural land
Property tax is also applicable to agricultural land at rates varying from ALL 700 to ALL 5,600 per
hectares, depending upon their use. A tax credit of 50% may be available for certain rural
projects.
The local tax on building ground
For the first time in the tax history of Albania since 2016 will be taxed also the construction
ground. The tax base is the area of construction land measured in hectares. The tax is levied on
each hectare and varies depending on the district where the agricultural land is located. The real
estate tax on agricultural land per hectare varies from ALL 1,400 to ALL 5,600
Tax of impact on infrastructure
The tax base is the value of the new investment required to undertake or value in Leks of
domestic sales price per square meter of the new investment.
In the case of buildings for residential or service unit from building companies, which are not
intended for use in the tourism sector, industry or public the tax of impact on infrastructure it is
4% to 8% of the sales price per m².
In the case of other buildings, the tax rate is shown as a percentage of the investment value and
is 1 to 3 percent of this amount, while in the Municipality of Tirana is 2 to 4 percent of it.
City tax
City tax City tax is payable by all persons residing in a hotel, both Albanian and foreigners. In
2016 this tax has changed and is not with 5 percent of the accommodation price, but instead it
is Euro 1 per night for person.
This tax is calculated and withheld by the hotel administration. The hotel administration must
remit the total amount of city tax collected to the respective municipality by the fifth of the
following month in which the hotel invoice was issued.

The other local taxes are advertising tax; annual tax for vehicle registration; Tax for occupation
of public space; Temporary taxes; Registration tariff for various activities; Vehicle parking tariff;
Tariff for services
In 2016, the cleaning tax is substituted with the tax on infrastructure of education, which it is €
1.05 /month for every family.
National taxes
The national taxes are levied by a specific law, which was amended for 2016 for specific royalty
taxes. There are a variety of other national taxes and fees. These include port charges, consular
fees, TV and telephone taxes, driving license fees, airport arrival and departure tax, circulation
tax on vehicles, plastic and glass packaging tax. Royalties shall be declared within deadlines
provided by the Law on National Taxes through a specific tax return. The detailed list and taxes
are to Annexes.
Luxury Tax
For the first time in tax history of Albania in 2016 enters in force the luxury tax on cars with
motor over 3000 cm³ or with a value equal or more than € 50,000. The registration tax for the
first time for cars that are imported it is 70 thousands Leks per year. The annual tax it is 21
thousands Leks.
Anti-avoidance rules
Transfer pricing – Albania applies the arm’s length principle. Since 2014 in Albania are in force
the transfer pricing guidelines6
. The Albanian Tax Instructions refer to the OECD transfer pricing
guidelines, 2010 for guidance in applying transfer pricing principles.
Thin capitalization
The tax deduction for interest paid is restricted when:
- The debt-to-equity ratio is equal to or greater than 4:1. (Note, however, that banks,
insurance and leasing companies are not subject to this rule);
- Interest paid is in excess of the 12-month average rate of the inter-bank rate as officially
publicized by the Bank of Albania.
6
Instruction No. 16/2014, signed by Minister of Finance

Excise tax
Excise duties are levied on certain domestic or imported goods such as alcoholic beverages, fruit
juice, water and other refreshment beverages, cigarettes, coffee, fuel oils, cosmetics, perfumes,
packaging materials etc. Tax liable persons for excise duties are licensed producers and
importers of the goods. Excise goods in the Republic of Albania and the relative tax rates are
shown in the link7
Investment Incentives of economic sectors
Manufacturing sector Lease of public property
Government can lease public property of more than 500 m2, or grant a concession for the
symbolic price of 1 euro if the properties will be used for manufacturing activities with an
investment exceeding 10 million euro, or for inward processing activities.
The Government can also lease public property or grant a concession for the symbolic price of 1
euro for investments of more than 2 million euro on activities that address social and economic
issues in a certain area, as well as activities related to sport, culture, tourism and cultural
heritage. Criteria and terms are decided on a by case basis by the Council of Ministers.
Manufacturing activities are exempt from VAT on machinery and equipment. The employer is
exempt from the social security tax payment for 1 year for all new employees. The state pays
the salaries for 4 months for the new employees and offers various financing incentives for job
training.
Apparel and footwear producers are exempt from 20 percent VAT on raw materials as long as
the finished product is exported.
The hydrocarbons sector, exploration and exploitation
Companies operating in the oil and gas extraction industry pay profit tax at the rate of 50
percent (different from the flat 15 percent corporate income tax applicable for all other
taxpayers) after deduction of all capital expenditure and operating and administrative expenses,
in accordance with the respective petroleum sharing agreement signed with the government
(PSA are negotiated on a case by case basis). The import of goods or services relating to the
7
http://www.dogana.gov.al/sites/default/files/Ligj%20142%20Per%20%23%20Ligjit%2061_Akciza_FZ-174-2014.pdf

performance of exploration/research phase of petroleum operations, carried out by contractors
who work for these operations, is VAT exempt.
Energy power sector
Cement and iron imported for the construction of HPPs is VAT exempt. Foreign tax credit:
Albania applies foreign tax credits rights even in case there is no double tax treaty in place with
the country where the tax is paid. If a double taxation treaty is in force, double taxation is
avoided either through an exemption or by granting tax credit up to the amount of the
applicable Albanian corporate income tax rate (currently 15 percent). Corporate income tax
exemption: Film studios and cinematographic productions, licensed and funded by the National
Cinematographic Centre are exempted from paying corporate income tax.
Tax exemption of dividends designated for investments
Dividends and profit share paid by a resident or non-resident company to a resident taxpayer
will not be subject to corporate income tax for the resident taxpayer. This applies, despite the
participation quote, in amounts or number of shares, in shareholder capital of the voting rights
or participation in initial capital of the beneficiary.
Customs
Customs duties are levied on the import of goods into Albania at the rates specified in the
Customs Tariff. Customs duties are prescribed based on customs tariffs, and are amended every
year.
There are three categories of customs duties used in Albania:
1.Tax on the value: calculated as a percentage of the value of goods that will be taxed;
2.Specific duty: calculated as a fixed amount per item of the goods that will be taxed; and
3.Combined duties: composed from these two categories of customs duties.
In special cases, to reinforce or replace customs duties, the following duties can be temporarily
used:
- special customs duties: when imported goods are harmful to national manufacturers of
the same goods;
- anti-dumping duties: when goods are imported at a much lower price
than they are sold at in the exporting country; and
- balancing duties: when imported goods cause the slowing or stopping of the
production of the same goods in Albania.

The new Custom Code was approved by Albanian Parliament in 2014. The new code provides for
different regimes for the circulation of goods within Albania. The Custom Code is aligned to the
closest level to the new Regulation Commission no. 952/2013, dated 09 October 2013 'Union
Customs Code,' which it is now an integral part of the new Customs Code.

2. The federal system of taxes in Bosnia and Herzegovina
There are two main tax jurisdictions in Bosnia and Herzegovina (BiH): the Federation of BiH
(FBiH) and the Republika Srpska (RS). Brcko District (BD) is a unit of local self-governance which
comes under the exclusive sovereignty of the national government. The complex system of
public administration has created multiple layers of government, which affects efficiency at all
levels. Indirect tax regulations are imposed at the state level, while direct taxes are imposed at
the entity/district level.
A. State level taxes and rules
There are the joint stock company and the limited liability company. Foreign companies can
open representative offices and/or branch offices, but such offices do not have legal entity
status. Representative offices of foreign companies can be registered in all three administrative
units. In BiH there’s not holding company regime.
The FBiH/RS requires a taxpayer to disclose on the annual tax return the difference between
market and transfer prices which are not at arm’s length, and the tax base should be adjusted
accordingly. There is no guidance on how market prices should be determined (information on
available methods follows), and there is no developed practice on which to rely. Companies
doing business in BiH should be aware that different transfer pricing rules apply in the FBiH and
in the RS. The main difference is the range of acceptable methods. Whereas only the
Comparable Uncontrolled Price (CUP) Method and Cost Plus Method (CPLM) are acceptable in
the FBiH, all of the Organisation for Economic Co-operation and Development (OECD) methods
(CUP, CPLM, Resale Price Method, Profit Split Method, and Transactional Net Margin Method)
are acceptable in the RS.
The statute of limitations on assessment of transfer pricing adjustments is five years and it
commences from the end of the year in which the tax return should have been submitted.
Additional taxable income assessed is subject to the standard corporate profit tax rate of 10
percent increased by the penalty interest of 0.04 percent/day in FbiH and 0.03 percent/day in
RS. The RS requires that a transfer pricing analysis be prepared.

Tax residents of the FBIH and RS are taxed on worldwide income; nonresidents are taxed only
on FBiH/RS-source income. An individual is considered resident for personal income tax
purposes if his/her residence or center of business and/or vital interests is in the FBiH/RS, or if
he/she is present in the FBiH/RS for at least 183 days in the aggregate during a tax year.
In both the FBiH and RS, each taxpayer must file an individual return; joint filing is not
permitted.
The VAT is levied at the state level and is applicable to the imports of goods into the territory of
BiH as well as goods and services supply in the territory of BIH.
VAT Law is in accordance with the EU 6th Directive on VAT
In both the FBiH and RS, Value Added Tax (VAT) is levied at the state level and applies to the
supply of goods or services supplied for consideration; the import of goods; the use of business
assets or inventory for nonbusiness or personal purposes; and the provision of services for no or
reduced consideration or for nonbusiness purposes.
The standard rate is 17%. Certain transactions are exempt, including certain public services,
health and medical services and financial services. Exports of goods are zero rated.
Registration is compulsory if the individual/legal entity performs or intends to perform taxable
activities in BiH. The threshold for VAT registration is approximately EUR 25,000. Voluntary
registration is possible if the threshold is not met in certain cases. A taxable person established
abroad that carries out taxable economic activities in BiH must register through a VAT
representative.
VAT is calculated on a calendar month basis. VAT returns and payments are due by the 10th
day of the following month and is paid to the Single Account open at the BiH Central bank.
Collection of VAT on supplies of goods and services related to the construction of immovable
property is a subject of special scheme.
Special taxation procedures exist for the following as well:
 small companies
 farmers
 services provided by travelling agencies and tour operators
 supply of second hand goods, works of art, collector’s items and antiques, and
 supply of goods on public auction

The Indirect Taxation Authority is responsible for the collection of all indirect taxes at on the
entire territory of Bosnia and Herzegovina. The Indirect Taxation Authority is an autonomous
administrative organization responsible for its activities, through its Governing Board, to the
Council of Ministers of Bosnia and Herzegovina The field activities are run by four regional
centres in: Sarajevo, Banja Luka, Mostar and Tuzla, 30 customs sub-offices and 59 customs
posts, out of which 40 are passenger border crossings, 4 airports, 8 railway border crossings, 3
overseas mail offices and 4 free zones.
Corporate Income Tax Law and Regulations in the FBiH and RS, Personal Income Tax Law and
Regulations in the FBiH and RS, Value Added Tax Law and regulations at the state and cantonal
levels.
Taxation of capital gains from the sale of financial instruments on the whole territory of BIH are
regulated separately by the territorial entities (the FBIH, the RS and BD ). However, in general,
capital gains are treated as profit and included in the ordinary taxable income which is taxed at a
rate of 10%.
Custom duties in BIH are regulated by the Customs Tariff Law. Indirect Taxation Authority is
responsible for the collection of all customs duties. Import customs rates attributed to BIH
according to the customs tariffs are: 0%, 5%, 10%, and 15%.
The reduced import custom duty rates apply only to the goods that are imported from EU.
Customs protection is provided for agricultural products. Customs duties exemption is
applicable on equipment imported as part of share capital. No exemptions apply on passenger
vehicles, slot and gambling machines.
Excises are applicable on commodities and goods like oil products, tobacco products, soft drinks,
alcoholic drinks, beer, wine and coffee. The subject of taxation is the trade of excise products
that are manufactured in BIH, when the manufacturer trades with them for the first time and /
or during the import of excise products in Bosnia and Herzegovina.
In Bosnia and Herzegovina there are 4 major regional centres:
 RC Banja Luka,
 RC Sarajevo,

 RC Tuzla,
 RC Mostar
BiH has concluded 40 tax treaties. The treaty concluded between Denmark and the former
Yugoslavia that was applicable in BiH on the basis of succession is no longer valid starting from
1 January 2016 due to reciprocity as the Danish Tax Authorities already denied application of
this treaty.
IAS and IFRS are fully applicable in BiH. Rules also are provided in the Laws on Accounting and
Audit and the framework law at the state level.
B. Entity level taxes
FBiH Corporate Income Tax (CIT)
A company is resident if it is registered as a legal entity in the relevant jurisdiction. An entity has
a taxable presence in the FBiH by carrying out business activities in the jurisdiction that meet the
criteria for a permanent establishment or by having a branch office. Resident companies are
subject to tax on worldwide income, while nonresident companies are taxed only on income
derived from the relevant jurisdiction.
Amendments to the Company Law and to the Law on Registration of Business Entities of the
FBiH introduced the possibility for foreign companies to establish one or more branch offices.
However, registration of a branch office of a foreign legal entity is still not enabled in practice.
Group taxation is allowed for a group of resident companies where the parent company holds at
least 90% its subsidiaries.
The capital requirement is EUR 500.
The tax return must be submitted and tax due paid to the authorized branch office of the tax
authorities within 30 days after the statutory deadline for the submission of the financial
statements, which is the end of February of the following year, i.e. no later than end of March of
the following year.
The new CIT Law came into force in March 2016. The new CIT Law introduces the thin
capitalisation rule, the obligation for possession of transfer pricing documentation at the

moment of submission of the annual CIT return, and prescribes fines of up to 500,000 euros
(EUR) for taxpayers who do not possess the prescribed documentation on transactions with
related parties.
A CIT payer is also a business unit of a legal entity from RS and BD that is registered in the
territory of the FBiH for the income generated in the territory of the FBiH.
A CIT payer in the FBiH is also a business unit of a non-resident legal entity that performs
activities through a permanent establishment (PE) in the territory of FBiH and is a resident of
the FBiH.
A CIT payer is also a non-resident in respect to the income generated from a resident of the
FBiH.
The taxable base is determined by adjusting the accounting profit or loss for allowable expenses.
The CIT rate in the FBiH is 10%.
FBiH foreign tax credit
When a taxpayer generates income or profit through business activities outside of the FBiH
(directly or through a business unit) and pays the profit tax on such activities, the tax paid
abroad shall be credited, up to the amount of the profit tax that would have been paid for the
income or profit generated by the same activities in the FBiH. The amount of tax credit cannot
exceed the amount of tax that would be calculated in the event when the same income would
be earned
FBiH investment incentive
Taxpayers who invested their own resources in production equipment worth more than 50% of
realized profit in the tax period shall be relieved from 30% of taxation for the year of the
investment.
A taxpayer who invested in production within the territory of the FBiH for five consecutive
years for a minimum fee of EUR 10 million will be relieved from 50% of taxation for a period of
five years, starting with the first year in which it has invested at least EUR 2 million.

The tax base is total gross taxable income paid by the employer less employee contributions and
deductible allowances (e.g. the monthly basic personal allowance, dependent family member
allowance(s)).
Personal deductions in the FBiH are approximately EUR 1,800 per calendar year. Additional
deductions include the dependent family member allowance, interest paid on home mortgages
and certain payments for health services.
FBiH employment incentive
A taxpayer who employed new employees is entitled to a tax-deductible expense in the double
amount of gross salary paid to newly employed employees if the following conditions are met:
 Employment contract has to be concluded on a full-time basis for period of minimum 12
months.
 Newly employed employee has not been employed by the taxpayer or by a related legal
entity in the past five years.
Dividends received by companies from their subsidiaries are exempt from corporate tax.
Dividends paid to a nonresident are subject to a 5% withholding tax unless the rate is reduced
under a tax treaty. Interest paid to a nonresident is subject to a 10% withholding tax unless the
rate is reduced or the payment exempt from withholding tax under a tax treaty.
Capital gains are not taxable.
Tax losses may be carried forward for up to five years. Losses may be offset against the first
available profits, with the oldest losses offset first. The carryback of tax losses is not permitted.
No Alternative minimum tax and No Foreign tax credit
Resident taxpayers are entitled to a tax credit for tax paid abroad up to the corporate income
tax liability.
Property tax is levied at the cantonal level. In Zenica Canton the tax rate of tax on transfer of
Land and Real Estate is 8% and in all the other nine cantons it is 5%.

The acquisition of real estate is subject to real estate transfer tax, levied at the cantonal level.
The tax base is the purchase value of the property at the time of the transaction. Either the
buyer or seller may be responsible for payment of the tax, depending on the real estate transfer
tax law in the particular canton.
Inheritance and gift taxes are levied at the cantonal level, with tax due on the transfer of
immovable and movable property. Since the tax rate is levied at the cantonal level, it varies
between 2% and 10%.
The employer contributes 10.5% of the employee’s gross salary and the employee contributes
31% of the gross salary as social security contributions.
In the FBiH, financial expenses for interest per financial agreements and instruments to related
parties are generally recognized for tax purposes. However, if the ratio between these
obligations per financial agreements and the registered share capital of a taxpayer exceeds the
ratio of 4:1, then the financial expenses exceeding the 4:1 are not recognized for tax purposes
and cannot be transferred to another tax period. However, this does not apply to banks and
insurance companies.
Tax Administration of Federation BiH is responsible for the implementation of tax assessment,
tax collection and control through its cantonal branch offices.
RS CIT
A branch of a foreign legal entity can only be registered in RS. The tax treatment of the branch
of a foreign legal entity is still quite unclear from the local perspective, so we recommend
contacting a tax and accounting specialist.
The RS does not allow for consolidated returns. Each entity must file a separate return.
The capital requirement it is EUR 0.5.
The tax return must be submitted within 90 days of the end of the tax year, and in the case of a
calendar year-end, no later than 31 March of the following year.

A CIT payer in Republika Srpska is:
 A legal entity from Republika Srpska that generates income from any source in
Republika Srpska, FBiH, Brčko District, or abroad.
 A business unit of a legal entity with its head office in FBiH or Brčko District that
generates income in the territory of Republika Srpska.
 A non-resident legal entity that conducts business activity and has a PE in Republika
Srpska, for income that is related to that PE.
 A non-resident legal entity that generates income from immovable property in
Republika Srpska, for the income that is related to that immovable property.
 A non-resident legal entity that generates income in Republika Srpska, not mentioned
above, and is subject to withholding tax (WHT) in accordance with the CIT law of
Republika Srpska.
The CIT rate in Republika Srpska is 10%.
RS foreign tax credit
If a legal entity from Republika Srpska obtains revenue from a foreign state and the revenue is
taxed both in Republika Srpska and in the foreign state, then the tax paid to the foreign state,
whether paid directly or withheld and remitted by another person, is to be credited from RS
CIT, unless such legal entity from Republika Srpska elects to treat the foreign tax as a
deductible expenditure in determining the fiscal year tax base. The amount of tax credit cannot
exceed the amount of tax that would be calculated in the event when the same income would
be earned.
RS investment incentive for production companies
For a taxpayer who invests in property, plant, and equipment (PPE) for performing its own
registered business activity in the territory of Republika Srpska, a deduction is allowed for the
amount of the investment. Only companies registered for production activity in accordance
with special Ministry decision can use this tax incentive.
If the taxpayer disposes of the PPE within three years of the year for which the tax incentive
was used, the taxpayer will have to pay the additional tax as if they never used the incentive, as
well as penalty interest for late payments.

The tax base is total gross taxable income paid by the employer less social security contributions
and deductible allowances (e.g. dependent family member allowance(s), interest paid on
housing loans, and pension contributions paid for voluntary pension insurance up to a ceiling,
where applicable).
There is a personal allowance in the amount of approximately EUR 1,200 per calendar year and
a dependent family member allowance.
RS employment incentive
For a taxpayer who employs 30 new employees (which were registered in the RS
unemployment agency) for an indefinite period of time during the tax period, a deduction is
allowed for the paid PIT and social security contributions for those employees.
If the taxpayer lets go of employees within three years for whom the tax incentive was used,
the taxpayer will have to pay the additional tax as if they never used the incentive, as well as
penalty interest for late payments.
Resident taxpayers are entitled to a tax credit for tax paid abroad up to the corporate income
tax liability.
Tax incentives are granted in the RS for investment in equipment, plant and real estate
necessary for the taxpayer’s business operations, up to the amount of the investment. Tax
incentives also are granted for hiring at least 30 new employees for an indefinite period of time,
up to the amount of personal income tax and social security contributions payable in respect of
the employees.
Royalties paid to a nonresident are subject to a 10% withholding tax unless the rate is reduced
under a tax treaty.
Technical service fees are subject to a 10% withholding tax unless the rate is reduced or the
payment is exempt from withholding tax under a tax treaty.
There are not branch remittance tax.

There are no taxes applicable on gifts and inheritances.
The tax rate is determined by the municipality in which the property is located. There is no real
estate transfer tax, although the purchaser/owner of property automatically becomes the real
estate taxpayer according to the real estate tax law.
The purchase of real estate is not subject to real estate transfer tax, but the taxpayer is the
owner of the real estate. The tax base for real estate tax purposes is the estimated market value
of the property. Each municipality determines its own tax rate which may range from 0.05% to
0.5%.
The employee contribution is 33% of gross salary. With an aim to improve the demographic
picture, a tax exemption for remuneration of child birth has been introduced in the amount of
one average net salary.
There are no thin capitalization rules.
Capital gains are taxed at the rate of 10% and include gains arising from the sale of immovable
assets, gains arising from the sale of property rights, authorship rights, license, and franchise
rights
Tax Administration of the RS is responsible for implementation of all tax laws. Tax
Administration is under the Ministry of Finance of the RS.
BD CIT
The BD CIT law prescribes that a resident is a legal entity registered in Brčko District.
BD regulations do not allow registration of branch of a foreign legal entity.
A CIT payer in Brčko District is:
 A legal entity from Brčko District that generates income from any source in Bosnia and
Herzegovina or abroad.
 A business unit of a legal entity with headquarters in the FBiH or Republika Srpska, for
income generated in Brčko District.
 A non-resident legal entity that conducts business activity and has a PE in Brčko District,
for income that is related to that PE.

 A non-resident legal entity that generates income from immovable property in Brčko
District, for the income generated in Brčko District.
 A non-resident legal entity that generates income in Brčko District, not mentioned
above, and is subject to WHT in accordance with the CIT law of Brčko District.
The CIT rate in Brčko District is 10%.
BD foreign tax credit
If a legal entity from Brčko District obtains revenue from a foreign state and the revenue is
taxed both in Brčko District and in the foreign state, then the tax paid to the foreign state,
whether paid directly or withheld and remitted by another person, is to be credited from the
BD CIT, unless such legal entity from Brčko District elects to treat the foreign tax as a deductible
expenditure in determining the fiscal year tax base. The amount of tax credit cannot exceed
the amount of tax that would be calculated in the event when the same income would be
earned.
BD investment incentive
For a taxpayer who invests in machines and equipment for performing its own registered
business activity on the territory of Brčko District, a deduction is allowed for the amount of the
investment.
BD employment incentive
For a taxpayer who employs new employees for an indefinite period of time during the tax
period, a second deduction is allowed for the total amount of paid gross salaries for the new
employees.
Tax administration Brčko District is the institution responsible for the issue of direct taxes.

3. The simple tax system of Kosovo
Kosovo has a simple tax system and relatively low tax rates. A risky feature of Kosovo’s tax
system is the high dependence on border taxes.
Following types of businesses are registered in Kosovo:
Individual businesses,
general partnerships,
Partnerships,
Limited Liability Companies,
Joint stock companies,
foreign companies,
socially owned enterprises and
Agricultural cooperatives.
The Kosovo tax legislation provides for the following taxes:
Corporate income tax (CIT)
Personal income tax (PIT)
Value added tax (VAT)
Withholding tax (WHT)
Custom duties
Excise tax
Local taxes.
Corporations conducting business in Kosovo are subject to CIT at a rate of 10%. The following
entities are subject to CIT:
 Corporations or other business organizations which have the status of legal entities
under the applicable law in Kosovo
 Business organizations operating with publicly or socially owned assets
 Organizations registered as NGOs under the Regulation on the Registration and
Operation of Non-Governmental Organizations in Kosovo

 Permanent establishments in Kosovo of non-resident persons. Kosovo residents are
considered to comprise: corporations, groups of corporations or organizations
established in Kosovo or which have their place of effective management in Kosovo.
Kosovo resident corporations are subject to CIT on their worldwide income, whereas non-
resident entities are subject to tax only on the income derived from the Kosovo source.
Taxpayers with an annual gross income (revenue) of EUR 50,000 or less may choose to be taxed
either on an actual income basis or on a presumptive tax basis and have to pay:
 3% of each quarterly gross income from trade, transportation, agricultural or similar
businesses but not less than EUR 37.50 per quarter
 9% of their annual gross income deriving from the provision of services, vocational,
entertainment and similar activities but not less than EUR 37.50 per quarter
 10% of the net rental income for the quarter, reduced by any amount withheld during
that quarter.
The corporate income tax is applied to the income as calculated in the financial statements and
adjusted for tax purposes. In determining the taxable income, expenses are deductible only if
they are incurred wholly and exclusively in connection with the economic activity.
The Corporate Income Tax Law provides a list of expenses that are non-deductible for tax
purposes, consisting of:
 fines, penalties and interest imposed by any public authority and expenses related to
them;
 income tax paid or accrued for the current or previous tax period and any interest or
late penalty incurred for its late payment;
 any loss from the sale or exchange of property between related persons;
 pension contributions above the maximum amount allowed by the Kosovo Pension
Law;
 bad debts that do not meet the specified conditions;
 contributions made for humanitarian, health, education, religious, scientific, cultural,
environmental protection and sports purposes, which exceed 5% of taxable income
(before the deduction of such expenses);

 representation costs (these include publicity, advertising, entertainment and
representation) which exceed 2% of the total gross income; and
 accrued expense for which the withholding tax should be paid, unless such expense is
paid on or before 31 March of the subsequent tax period.
The losses have to be settled according to the “first loss before the last one” principle.
As a general rule, the losses may be carried forward for 7 (seven) years, but they do not survive
a change of more than 50% in ownership. The Tax Administration may allow losses to be carried
forward in certain approved restructurings through M&A, demerger, insolvency, and exchange
of shares. A number of companies have utilized this right last year.
Foreign tax credit
According to the tax legislation provisions, income taxes paid abroad by residents are credited
to the tax balance due in Kosovo up to the maximum amount of tax payable in Kosovo. Non-
residents with a permanent establishment in Kosovo can obtain an official document from
Kosovo’s tax administration, certifying the amount of taxes they have paid, so this can be used
to obtain a credit if permitted by the foreign tax authority.
Special treatment of insurance companies
Companies, whose activity is the insurance or reinsurance of life, property, or other risks, pay
tax at a 5% rate of the gross premiums accrued during the tax period, instead of corporate
income tax.
All individuals who (i) have their principal residence in Kosovo or (ii) are physically present in
Kosovo for more than 183 days in any 12-month period of time, and all entities, individual
business enterprises and partnerships which are established in Kosovo or have their place of
effective management in Kosovo are considered object of personal income tax (PIT)
Kosovo resident individuals, individual business enterprises and partnerships are subject to
personal income tax on their worldwide income, whereas non-resident individuals, individual
business enterprises and partnerships are subject to tax only on income derived from a Kosovo
source.

Personal income tax is progressive (0 – 10%) and levied on the following categories of income:
 Wages
 Business activities
 Rents
 The use of intangible property
 Interest
 Capital gains
 Lottery winnings and winnings in games of chance
 Pensions
 Any other income which increases the taxpayer’s net worth.
The following income will now be exempt from PIT:
 Wages of individuals with disabilities as foreseen under relevant laws for these
categories.
 The entire expenses paid by an employer for the formal training of his employees, so
that the latter can acquire the relevant skills needed to perform assigned tasks
 Mandatory contributions paid by the employer for health insurance for the employee,
as defined by relevant legislation on health insurance.
However per-diems will be treated as taxable income, in addition to bonuses and commissions.
The employer and employee must pay pension contributions at a minimum level of 5%. The
maximum level allowed is 15% of the gross monthly salary. Under Kosovo legislation, foreign
individuals are not required to pay pension contributions.
The Assembly of Kosovo approved Law No. 04/L-249 on Health Insurance in 2014 which
regulates the public health insurance system. Accordingly, the mandatory health insurance
premium for employees and employers is 7% of the gross income shared equally by the
employer and the employee (i.e. 3.5% each). The start date for the collection of premiums will
be separately confirmed by the Ministry of Health.

Taxes must be withheld by employers on a monthly basis. Taxpayers who receive income other
than wages, dividends, interest, lottery, gambling, or income from intangible property are
required to prepare an annual tax return for personal income tax by 31 March of the following
year.
Taxpayers registered for VAT are entitled to recover the input VAT, provided that the VAT is
charged in relation to their taxable activity. When taxpayers perform both taxable and exempt
supplies, VAT may be partially reclaimed. VAT cannot be reclaimed on certain recreation
expenses and representation costs, and it is limited on expenses for passenger vehicles which
are not used solely for business purposes.
The base VAT rate has been increased to 18% (from its previous rate of 16%), while a reduced
base rate of 8% has been introduced to include supply of water (except bottled water),
electricity, grains, products made from grains (for human consumption), cooking oils made from
grain and oil seeds, daily products (for human consumption), eggs (for consumption), salt (for
human consumption), textbooks, supply and lending of books from libraries, IT equipment,
supply of medicines, pharmaceutical products etc. (previously 0%). A full list of items subject to
the reduced rate of 8% is contained in Annex 1 of the Administrative Instruction (AI)
No.03/2015.
The VAT registration threshold and turnover calculation method has been changed from EUR
50.000 in the previous 12 months to EUR 30.000 within a calendar year. The law further clarifies
that a foreign person conducting an economic activity in Kosovo will be considered a taxable
person from the commencement of the economic activity in Kosovo. The requirement to obtain
a separate VAT certificate for import and export has also been removed.
The following activities are VAT-exempt:
 insurance and reinsurance transactions;
 financial services;
 the supply of postage stamps;
 the supply at face value of fiscal stamps and other similar stamps;

 betting, lotteries and other forms of gambling;
 the supply of land;
 the supply of houses, apartments or other accommodation used for residential
purposes; and
 the leasing or letting of immovable property.
Corporate Income Tax incentives
Tax holidays and other tax exemptions for new businesses have been introduced under the Law
on Personal Income Tax and are defined in a sub-legal act by the Ministry of Finance.
1. The cost of employee training shall be fully allowable for the employer and not limited to any
specific amount as it was previously. Such training expenses shall be allowed in whole in the
year in which such training costs occurred.
2. The deduction allowed for contributions (donations and sponsorship) made for humanitarian,
health, education religious, scientific, cultural, environmental protection and sports purposes
has increased up to a maximum of 10% of taxable income computed before such deduction are
applied. (The previous maximum was 5%). In addition to this deduction taxpayers that
contribute to certain areas as prescribed by special laws can have an additional allowance of
10%.
3. Any dividends paid or received remain exempt from Corporate Income Tax (and Personal
Income Tax)
4. Advertising and promotion costs such as: TV, radio, newspaper, magazines, direct
commercials, internet, posters, flyers, billboards, transit commercials and other similar ones are
now fully deductible expenses for tax purposes. Other representation costs e.g. for meetings,
presentations, inaugurations etc. shall be limited to 1% of gross annual income.
Certain tax breaks and incentives for new businesses are introduced in 2016. This tax incentive
allows businesses investing a certain amount and hiring a certain number of employees to
benefit from two to six years of tax breaks regarding CIT. To benefit from such tax breaks, an
entity must:
 invest over EUR 10 million within three years with at least 120 hired employees for a six-
year tax break;
 invest over EUR 5 million within three years with at least 80 hired employees for a four-year
tax break;

 invest over EUR 2 million within two years with at least 50 hired employees for a three-year
tax break; or
 invest over EUR 500.000 within three years with at least 30 hired employees for a one-year
tax break.
The Corporate Income Tax Law indicates the rules applicable to capital gains. As a general rule,
capital gains and losses are treated as ordinary income/losses from economic activity. Capital
gains are not recognized for fixed assets which are depreciated in a pool and purchased prior to
1 January 2010.
There is no participation exemption for capital gains.
There is no relief for reinvestment.
Dividends distributed by a local company are considered as exempt income.
Non-residents are taxed on the disposal of real estate in Kosovo, at a rate of 10% of the realized
profit. Payments made to natural persons, farmers, collectors of recycled materials, forest fruits,
healing plants and similar are taxed at source at a rate of 3%. Payments made to nonresident
individuals or businesses are subject of a withholding tax at a rate of 5%.
There are no “thin capitalization” rules or any similar rules.
There is a 9% withholding tax on property rental payments made to non-residents or residents.
There is no withholding tax on the proceeds of selling a direct or indirect interest in local
assets/shares.
There are no taxes payables upon the formation of a subsidiary.
There is no difference between the taxation of a locally formed subsidiary and the branch of a
non-resident company.
There is no withholding tax or other tax with regard to the remittance of profit by the branch.
Foreign-sourced income is taxable in Kosovo. However, tax credit is allowable for the amount of
income tax paid overseas for the income derived abroad.
Branches are taxed only on the taxable income from a Kosovo source of income. The taxable
income is determined in the same manner as for resident companies. Taxable income of
branches is subject to Corporate Income Tax at the same rate of 10%.

There is no branch profit tax.
There is no tax on the transfer of an indirect interest in real estate located in Kosovo.
There are no requirements to disclose avoidance schemes.
Kosovo has not introduced any legislation in response to the OECD’s project targeting BEPS.
Kosovo does not maintain preferential tax regimes such as a patent box.
A noteworthy change will occur with the introduction of the Administrative Instruction on
transfer pricing (TP), which is expected to require companies to prepare transfer pricing
documentation. Considering the fact that the transaction threshold to be scrutinized by the Tax
Administration in harmony with TP rules is quite low – for transactions exceeding EUR 50.000,
and it is predicted that the volume of services required for TP and the market in general will be
vast, which will make experience in the sector scarce.
Developments in cross-border taxation will intensify, as Kosovo is expected to conclude other
DTTs, and the possibility of reconsidering tax liabilities and the taxation nexus, in conformity
with such DTTs, will broaden.
Customs duties are regulated by Code No. 03/L-109, Customs and Excise Code in Kosovo. The
regulation provides for a customs rate of 10% for all goods imported into Kosovo. Customs
duties are charged according to classification of imported goods in a six digit harmonized
system.
According to Law No. 04/L-163, the following goods are exempt from customs duties:
 Exports
 Goods imported by foreign diplomatic, consular missions and their personnel (except for
local personnel)
 Goods imported by UNMIK, KFOR, the United Nations High Commissioner for Refugees
(UNHCR), the International Committee of the Red Cross (ICRC) or by donors having
contracts with UNMIK
 Goods used for humanitarian purposes
 Goods used for agricultural production and some listed raw materials for heavy
industry, and
 Pharmaceutical products.

Excise taxes Law No. 03/L-112 on Excise Tax in Kosovo contain a list of goods subject to excise
tax and their corresponding excise rates. Goods subject to excise tax include: wine, cigarettes
and other tobacco products, oil, fruit juice and other drink concentrates, cars and other motor-
operated vehicles. Fixed amounts are provided for certain goods.
Local taxes are regulated by Law 03/L-049 on Local Government Finance. Municipalities may
impose the following taxes and fees:
• Tax on immovable properties situated in their territory
• An annual fee for business activity
• An annual fee for professional business
• An annual motor vehicle fee
• Construction permits and demolition fees
• Other fees in relation to services provided by the municipalities. Double Tax Treaties Kosovo
has a
There is a property tax in Kosovo. All persons who own, use or occupy immovable property are
subject to tax on real estate. The Municipal Assembly of each municipality sets the property tax
rates on an annual basis at the rates of 0.05% to 1% of the market property value. In the case of
properties used as principal residence is allowed EUR 10.000 allowable expenditure form
taxable value of property.
Double Tax Treaty (DTT) with the Republic of Albania effective from 1 January 2016, with
Macedonia effective from 1 January 2014, with the United Kingdom effective from 1 January
2016, with Hungary effective from 1 January 2015, with Slovenia effective from 1 January 2015
and with Turkey effective from 1 January 2016. Meanwhile, the Kosovo President has ratified
DTTs signed by Former Yugoslavia with Finland, Belgium, Germany and the Netherlands.
However, the effective applicability of such DTTs is unclear in Kosovo. It is unclear whether the
DTT provisions apply automatically in Kosovo or specific approval is to be obtained from the
Kosovo authorities. There are no specific internal rules in Kosovo on the implementation of the
DTTs in force. According to Law No. 03/L-071 on Tax Administration and Procedures, if the
existing tax laws relating to the international juridical double taxation of income and capital of
persons in the Republic of Kosovo do not address such taxation, the principles of the

Organization for Economic Cooperation and Development (OECD) Model Tax Convention on
Income and on Capital apply in order to avoid double taxation of such income and capital.
Kosovo tax treaties generally follow the OECD model. The new tax treaties must be ratified by
Parliament. A treaty ratified by Parliament becomes part of the Kosovo legal system after
publication in the Official Gazette and prevails over any law which differs from the treaty’s
provisions.
According to the provisions on interest, dividends and royalties, such income may be taxed in
either jurisdiction; this leaves room for discretion to the respective Tax Administration.
Additionally, this DTT’s protocol foresees that a PE in the event of construction works will be
established after a period of 12 months. The establishment of PE regarding construction works
is prolonged for an additional six months if another BIT is concluded within the same period of
time (18 months) with another state. These two scenarios are already provided for, while in the
first scenario the outcome is established on a case-by-case basis. The outcome of the second
scenario remains to be seen once Kosovo has signed new DTTs.
The firm has observed a moderate increase in restructurings through demerger procedures,
especially in relation to the division of real estate from actual business activities. This is due to
the real estate industry being one of the most profitable sectors in recent years.
Restructuring assistance has also been performed in conjunction with progressivity in taxation,
in some cases affected from the neighboring jurisdictions, which posed uncertainty in regards to
the neutrality principle.

4. Tax system competitiveness in Macedonia
In Macedonia, foreign investors are entitled to register and operate all types of Macedonian
companies, i.e. limited liability company, joint stock company, general partnership, limited
partnership, and limited partnership by shares. Besides, foreign companies are entitled to open
branches and representative offices in Macedonia.
In order to facilitate the registration of foreign companies, Macedonia introduced a one-stop-
shop system which enables the investors to register their companies within a day. The investors
who would like to use the one-stop-shop system need to visit a single office. Thus, the new
system reduces administrative barriers related to the incorporation of a company.
Once a company is registered, the Central Register of Macedonia will make publicly available the
following information about the company: (1) unique registration number; (2) a code and the
title of the registered main activity; (3) a code of the company form; (4) the unique tax number;
and (5) information about the bank account of the company.
It should be noted that companies need to obtain working licenses or permits before conducting
certain activities in Macedonia. The employees working in the Central Registry of Macedonia are
trained to provide the newly registered companies with information on how to obtain the
appropriate licenses.
At the end of each calendar year, the registered companies have the obligation to prepare
annual accounts in accordance with the local accounting rules. In addition, large and medium-
sized companies should prepare and submit financial statements in accordance with the
requirements of the International Financial Reporting Standards (IFRS). The Macedonian audit
laws state that audit activities should be performed in accordance with the International
Standards on Auditing.

The tax system in Macedonia includes:
a. Income taxes
- Profit tax
- Personal Income Tax
b. Consumption taxes
- Value Added Tax
- Excises
c. Property taxes8
d. Social and health contributions
e. Customs
Corporate Income Tax
The CIT in Macedonia is charged on two components, namely, any forms of distribution from
the profit (including dividend distribution) as well as certain non-deductible expenses and
understated revenues. The non-deductible expenses include, but are not limited to, expenses
which are not related to taxpayer’s business activities and employee-related expenses (e.g.,
holiday allowance, meals for employees, and expenses for the organization of business trips).
The understated revenues include, for example, understated revenues for supplies of services
and goods between related parties.
Taxpayers in regard of this direct tax are:
Legal entity (entity) – Resident of Macedonia that gains profit by performing activity in
the country and abroad. Resident is entity which is established or has headquarters on
the territory of the Macedonia.
Taxpayer of the CIT is also a permanent establishment of non-resident for the profit
realized by performing activity on the territory of the Macedonia.
Tax rate for profit tax of companies is 10%.
8
Along with the process of decentralization in the Macedonia, from 30.06.2005, the administration of the property
tax and the municipal fees is performed by the municipalities, as units of the local self-government and the City of
Skopje, as a separate unit of the local self-government

The taxation period for which the CIT is assessed, is one calendar year. If the taxpayer has been
working for a period shorter than one calendar year, as a taxation period is considered the
period of the year he was working for.
Advanced payment taxation period is one calendar month. The tax base for calculation of CIT is
the taxable profit assessed from the accounting gross profit realized in accordance with
accounting regulations and standards (as the difference between total revenue and total
expenses), increased for the unrecognized expenses.
The tax base is reduced by:
 The amount of collected claims up to the stated income, for which in the previous tax
periods was made increasing of the tax base, according to the taxable amount;
 The amount of the returned part of the loan for which in the previous tax periods was
made increasing of the tax base;
 The amount of dividends derived by a resident of the Macedonia with participation in
the capital of another taxpayer - a resident of the Macedonia, provided that they are
taxable according to the rate of 10%;
 Part of the loss transferred from previous years.
The reduction of the calculated tax is performed:
 for the amount of the approved tax exemption for purchased and put into service up to
10 fiscal systems of equipment for registering cash payments i.e. fiscal equipment and
integrated automatic management system;
 for the amount of tax included in taxable income / gains abroad (withholding tax) to the
prescribed rate;
 for the tax that the branch office paid abroad, for the profit which is included in
revenues of the resident legal entity in the Macedonia to the amount of tax assessed
according to the tax rate in the Macedonia.
The assessment and the payment of the CIT is made according the Tax Balance, which is
submitted to the Public Revenue Office in the deadline proscribed for submitting the annual
calculation according the Law on Trade Companies and the Accounting Regulations i.e. until

latest date of February of the year following the year for which the taxation is made. For the
taxpayers who submitted the Annual accounts to the Central Registry of Macedonia
electronically, the deadline for submission is March 15th.
Payment of the CIT after the end of the year
 The determined difference between the paid advances of the CIT calculated according
the tax amount in the form “DB” for the previous year and the real obligation of the
calculated CIT determined in the form “DB” for the acting year, the taxpayer is obliged
to pay within 30 days of the deadline for submission of the annual account.
 The payment of the CIT is made by the authorized person of the taxpayer. The payment
of the tax after the submitted tax return for self-taxation, in regular procedure is made
from the finances, including all available taxpayer’s bank accounts.
Payment of the monthly advances from the CIT
 The monthly advances of the CIT are determined in the amount of one twelfth from the
assessed tax in the Tax Balance form “DB“ for the previous year, increased for the
percentage of the cumulative increase of retail price in the Republic from the previous
period of the year, i.e. until 31 January the next year, related to the average retail prices
in the previous year.
 The monthly advances are paid within 15 days after the deadline of each calendar
month.
 The taxpayers/legal entities are not obliged to deliver Monthly calculation of the
advances of the CIT to the Public Revenue Office.
If the taxpayer as advances paid higher amount of tax than the amount he was obliged to pay,
he can require refunding of more paid tax from the PRO. The PRO is obliged the overpaid CIT to
refund to the taxpayer upon his request, within 60 days from the day the refund request
submission.
If the taxpayer does not require refund of the overpaid tax, the overpaid amount is considered
as advances for the next period.

The tax refund is also made with the settlement of the overpaid CIT with the tax debts of the
taxpayer on other basis. Upon the taxpayer’s request for refunding or settlement of the
overpaid tax, the PRO makes an appropriate decision. If after the settlement it is determined
that the taxpayer still requires tax refund, the PRO is obliged to make a decision for tax refund in
the shortest period of time.
The withholding tax is made on revenues paid in the Macedonia or abroad to the foreign legal
entities, and which are not realized in the frames of the business of the permanent
establishment of the foreign legal entity on the territory of the Macedonia, provided it is not
otherwise determined by the International Agreements for avoiding double taxation.
Revenues on which there is withholding tax:
 Revenue from dividends;
 Revenue from an interest of resident;
 Revenue from interest of non-resident who has permanent establishment in the
Macedonia, if the interest is at the expense of the permanent establishment;
 Revenue from royalties paid by a resident;
 Revenue from royalties paid by non-resident with permanent establishment in the
Macedonia, if the royalties is at the expense of the permanent establishment;
 Revenue from entertainment or sports activities that are performed in the Macedonia;
 Revenue from conducting management, consulting, financial services, research and
development services, if the revenue is paid by a resident or is at the expense of the
permanent establishment in the Macedonia;
 Revenue from insurance premiums for insurance or reinsurance of risks in the
Macedonia;
 Revenue from telecommunication services between the Macedonia and a foreign
country; and
 Revenue from rental property in the Macedonia.
The withholding tax is done by:
1. Domestic legal entities
2. Domestic natural persons – registered for performing activity and

3. Foreign legal entity or natural person-nonresident with permanent establishment in the
Macedonia.
The withholding tax rate is 10%.
The application of “Simplified Tax Regime for Trade Companies”
The trade companies which meets the conditions for calculating and payment of annual tax of
total income and which realized total income in the year that is being assessed from any sources
between EUR 48.000 and EUR 96.000 on annual level, can determine to calculate and pay
Annual Tax of Total Income according to the provisions of the chapter VII-a “Simplified Tax
Regime for the Trade Companies” of the Law on CIT, instead paying of CIT.
The trade companies cannot change the determined model/regime of taxation in the next three
years, including the year in which the tax of total income is paid, if in the next three years they
are realizing total income between EUR 48.000 and EUR 96.000 on annual level.
The trade companies which perform: banking, financial, insurance activity, as well as activity
from the area of the games of chance and entertainment games are not taxed by the Annual Tax
on Total Income, regardless of the amount of the realized total income.
Tax exemption
The trade companies that meet the conditions for calculating and payment of Annual Tax of
Total Income and which total income realized in the year for which the tax is being assess from
any source do not overcome the amount of approximately EUR 48.713 on annual level are
exempt of the obligation for paying of Annual Tax of Total Income.
Basis for Annual Tax on Total Income
The Annual Tax on Total Income is calculated on the basis of the realized total income on all
grounds (revenues from main activities, financial revenues, share in the profit of the associated
companies), in the business year for which the tax is being assess. The business year means
calendar year.

Rate on which the Annual Tax of Total Income is calculated and paid
The Annual Tax of Total Income is calculated in the amount of 1%from the realized total income
amount stated in to the Income Statement in the Annual Account and the financial reports
according to the provisions of the Law on Trade Companies, for the business year for which the
tax is being assess.
Method and period of registration of the Trade Companies for Annual Tax on Total Income
The trade company that meets the conditions for calculation and payment of the Annual Tax on
Total Income, the Public Revenue Office records them in Registry of Trade Companies for Annual
Tax on Total Income.
The PRO performs the registration on the basis of the data for the expressed total income in to
the Income Statement in the Annual Account and the financial reports according to the
provisions of the Law on Trade Companies, for the business year for which the tax is being
assess.
Тax balance of the total income which is submitted to the PRO within the period specified for
submitting the Annual Account according the Law on Trade Companies and the accounting
regulations i.e. until 28/29 of February in the year following the year for which the taxation is
being asses. For the taxpayers who submitted the Annual accounts to the Central Registry of RM
electronically, the deadline for submission is March 15th.
Tax incentives - CIT
Tax exemptions are consisting in reducing the tax base and reducing the calculated tax.
a. Reduction of tax base for reinvested profit9
The tax base is reduced for the amount of investment of profits (reinvested profit) for
development purposes i.e. investment in tangible assets (property, plant and equipment) and
intangible assets (computer software and patents) intended to expand the activity of the
taxpayer.
9
The right to tax exemption on the basis of reinvested profit, taxpayers for the first time will be able to realize for
the investments performed in 2014 by the separate profits from 2013 for investment.

b. Reducing the calculated tax
The calculated profit tax is reduced by:
 The approved tax exemption on the basis of the purchased and put into service up to
ten fiscal systems of equipment for registering cash payments ie fiscal equipment and
automatic integrated management system;
 The amount of tax included in taxable income / profits abroad (withholding tax) to the
prescribed rate;
 The amount of taxes paid by the subsidiary abroad for the profit included in the income
of the parent entity in the Macedonia up to the amount of tax assessed according to the
tax rate in the Macedonia.
c. Tax exemptions prescribed for special categories of taxpayers, regulated with the rules which
regulate their establishment and functioning:
 Protective companies, for employment of the disabled persons (in accordance with the
provisions of the Law on Employment of Disabled Persons);
 Economic units within the institutions for carrying out sanctions and juvenile
correctional institutions (in accordance with the provisions of the Law on enforcement
of sanctions); and
 Technological Industrial and Development Zones (in the period of 10 years under terms
and procedures determined by the Law on Technological Industrial and Development
Zones).
Personal Income Tax
Revenues realized by natural persons, in the country and abroad, are taxed with Personal
Income Tax (PIT).
The tax rate of PIT is at 10%.
The tax base for PIT calculation is different, depending on the type of revenue realized or the
activity performed by the natural persons.
The tax period for which the PIT is assessed is the calendar year.
The specific revenues realized during the calendar year, the taxpayers-natural persons have an
obligation to register in the Public Revenue Office and to submit an appropriate advance
payment tax return in the legal foreseen deadlines.

After the end of the calendar year, and latest to 15th of March, the natural person is obliged to
submit Annual Tax Return for PIT assessment, in which he will declare all revenues, realized on
different bases during the calendar year.
For more information regarding taxation and tax stimulations of PIT, choose a type of income:
Value Added Tax (VAT)
In Macedonia, VAT is levied on import of goods into Macedonia and supply of goods or services
in Macedonia. The standard VAT rate is 18%. A reduced VAT rate of 5% applies to certain goods
and services, such as agricultural machines, accommodation services, computers, food products,
publications, pharmaceutical and medical devices, software, and transportation of persons.
The goods and services which are exempt from Macedonian VAT with a right of deduction of
input tax include, but are not limited to, delivery of goods abroad, goods supplied in free trade
zones, provision of services outside Macedonia, and services concerning the export, import and
transit of goods. The goods and services which are exempt from a Macedonian VAT with no right
of deduction of input tax include, but are not limited to, insurance and re-insurance services,
healthcare services, education services, trade of postage and revenue stamps at their nominal
value.
A VAT registration is mandatory for taxpayers when: (1) they have a turnover higher than
approximately EUR 16.168 in a preceding or the current calendar year; or (2) they predict that
their company will achieve an annual turnover exceeding approximately EUR 32.337. The
companies for which the VAT registration is not compulsory may, at their own discretion,
register for VAT. A VAT registration can be done by an authorized company’s representative.
Companies registered for VAT need to submit monthly VAT returns by the 25th of the month
following the month to which the VAT return applies. Taxpayers who do not have any taxable
turnover in a given tax period should also submit a tax return in which the fields are filled in with
0 (zero). Taxpayers who terminate their activities should submit a tax return within 25 days after
the end of the month in which the activity was stopped.

The VAT due should be paid by monthly payers no later than the deadline for submitting the tax
return, i.e. no later than 25 days after the expiration of the tax period. Quarterly taxpayers are
paying the VAT until 25 April, 25 July, 25 October, and 25 January.
In order to receive a VAT refund, the taxpayer must submit a claim to the Macedonian Revenue
and Tax Administration. The claim needs to be accompanied by the invoices for which a refund
is requested. If the application is approved, the VAT refund will be issued within 10 days.
Finally, it should be noted that the EU VAT rules do not apply to Macedonia because it is not a
member of the European Union.
Excise duties
Excise duties are levied with respect to a limited number of goods produced or imported in
Macedonia. Petroleum products, alcohol and alcoholic beverages, tobacco products, and
passenger motor vehicles are subject to an excise duty at a flat or percentage rate. The excise
period is one calendar month, and excise duty is payable within 15 days as of the end of the
calendar month. The excise duty for alcohol beverages and tobacco goods is levied by way of
purchasing excise stamps.
The amount of excise duty for petroleum products depends on the type of petroleum product
and is payable per kilo/liter.
Alcohol and alcoholic beverages are taxable per liter/percentage of alcohol. Some categories of
alcoholic beverages (e.g. wine) are subject to no excise duty. Maximum excise duty payable is
up to EUR 5.5 per liter on pure alcohol.
The excise duty for tobacco products is combined and is calculated both per unit/kilo and as a
percentage from the retail price. As of July 2014 up to July 2023, the rate of the specific and
minimum excise duty on cigars/smoking tobacco will increase gradually every year.
The excise duty for passenger motor vehicles is calculated as a percentage of the market value
or the custom value of the vehicle. It ranges from 0% for vehicles valued up to EUR 3.000 to
18% for vehicles valued above EUR 30.000.

Property Tax10
According to the Law on property taxes, the Public Revenue Office supervises the work of the
municipality bodies, the municipality bodies in the City of Skopje and the bodies of the city of
Skopje i.e.
Social and health Contributions
Contributions from the compulsory social insurance are the following:
1. Pension and disability insurance based on the current payment;
2. Health insurance;
3. Health insurance in case of an injury at work and a professional illness;
4. Insurance in the case of unemployment;
5. Years of service for insurance that is considered with the prolonged duration
Taxpayer payments of contributions from compulsory social insurance is a physical
person/insured in whose name and for which account are paid the contributions and the
personal income tax, or:
1. Employee with the employment status with the legal entity
2. Executive member of a board of directors in a trade company, a member of a
management board in a trade company and manager of a trade company, if they are
not insured on any other grounds
3. Self-employed person
4. Individual farmer (holders of family agricultural economy of first, second and third
category according the Law on Agriculture and Rural Development, starting from 1st
January 2016)
5. Religious official person
6. Temporary unemployed person while receiving a pecuniary compensation from
insurance in case of unemployment, according the law
10
Along with the process of decentralization in the Macedonia, from 01.07.2005, the local taxes (Property Tax, Tax
on inheritance and gift, Tax on real estate turnover) are administered by the municipalities. More information
related to the local taxes you can find in the municipality where the taxpayer’s property is located.

7. A person who besides the income from employment, self-employment or retirement,
has realized an income from performing physical and / or intellectual work, based on
one or more contracts for work and / or copyright agreements or other agreements
with which is determined the fee for the performed work, if the total net amount of the
income under this basis is higher than the amount of the average net salary for the
previous year published by the State Statistical Office
8. A person employed which earns an income from performing physical and / or
intellectual work, based on one or more contracts for work and / or copyright
agreements or other agreements with which is determined the fee for the performed
work with the employer where is employed or other entities that have ownership,
organizational or management relations with the employer
9. A person who earns an income from performing physical and / or intellectual work,
based on one or more contracts for work and / or copyright agreements or other
agreements with which is determined the fee for the performed work, if the total net
amount of the income on that basis is higher than the amount of the minimum wage
established by law
10. Аn employee to whom the employment is temporarily suspended for using unpaid
parental leave
Taxpayer calculations and payment of contributions from compulsory social insurance, the
subject that has obligation on the burden and the expense of the taxpayer for payment of
contributions to calculate, withhold and pay the contributions and the personal tax from the
salary.
1. Employer
2. Legal entity – payer of the fee
3. Self-employed person
4. Executive member of the board of directors of a company, a member of the
management board of a company or manager of a company
5. The Fund for pension and disability insurance of Macedonia
6. Health insurance Fund of Macedonia
7. Employment Agency of the Macedonia
8. Ministry of Health

The basis for calculating and payment of social contributions depends on the type of income
gained by the taxpayer for payment of contributions:
 Salary, additional fees from the employment
 Monthly compensation specified in the contract for regulation of relations between the
company and an executive member of the board of directors, member of the
management board i.e. manager of a company, for executive member of the board of
directors of a company, a member of the management board of a company, or manager
of a company
 Salary for the part time jobs
 Average salary for an independent artist, top athlete, a person serving a prison
sentence, a person who is in custody, a minor who is serving an educational measure
placement in educational - correctional institutions and citizens who are not defined as
the taxpayers to pay the mandatory contributions for health insurance
 Monthly advance of the net revenue for self-employed person
 The retirement pay, or the compensation according the regulations of the pension and
disability insurance
 20% from the average paid monthly salary per employee for individual farmer
 50% of the average monthly salary paid per employee
 The amount of the difference between the net fee and the minimum wage established
by law, increased by contributions for compulsory pension and disability insurance,
contributions for compulsory health insurance and personal income tax from the
contract for work, copyright agreement or other agreement with which is determined
the fee for the performed work
 The amount of the difference between net fee and net average salary for the previous
year published by the State Statistical Office, increased by contributions for compulsory
pension and disability insurance, contributions for compulsory health insurance and
personal income tax from the contract for work, copyright agreement or other
agreement with which is determined the fee for the performed work
 The gross fee from the contract for work, copyright agreement or other agreement by
which is determined the fee for the performed work for the persons for who a taxpayer
for calculation and payment of contributions is the legal person-payer.

Taxation trends in Western Balkans, 2016

Taxation trends in Western Balkans, 2016

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